Distributors have less than 10 days to debate with ANRE the 6.94% regulated rate of return (RRR) proposed by the authority on Monday evening. The market needs to grow fast, and networks would need at least 6 billion euros over the next five years, if not more, to meet Romania’s ambitious climate targets. But is 6.94% enough?
It remains to be seen, with distributors expected to hold numerous discussions these days, after ANRE made a concession of just 19 basis points from the previous proposal, which was 6.75%. Currently the RRR is 6.39% for 2024, which is a transition year between two regulatory periods – the fourth and fifth, each period representing a five-year period.
Energy cannot be transported and distributed smoothly without modern networks and digitalized infrastructure.
In order to invest in networks, distribution operators need to use their own funds, but also European or other sources attracted from a competitive financial market. The distribution activity is fully regulated and the rate of return (RRR) recognized by the market arbiter – ANRE is only one of the elements that determine the final net profit of an operator. Thus, an operator’s final profit margin will depend on how the market regulator recognizes capital expenditure (CAPEX), operational expenditure (OPEX) and the level of RRR that should reflect current macroeconomic conditions and be sufficiently attractive for operators to mobilize the necessary funds for investment. Still under debate is the recognition of investments such as data centres and other digitalization measures.
The amortization of the investment will ultimately take place over 25-30 years, through tariffs, so as not to significantly affect customer bills.
cIt should be noted that in regulatory period number 4 (RP4), 2019-2023, operators have invested around 2.3 billion euros in distribution networks. RRR is currently 6.39%, the level set by ANRE in 2020.
